Country strategic opportunities programme

Transcription

1 Document: EB 2016/119/R.16 Agenda: 11(c) Date: 23 November 2016 Distribution: Public Original: English E Republic of Malawi Country strategic opportunities programme Note to Executive Board representatives Technical questions: Thomas Rath Country Programme Manager East and Southern Africa Division Tel.: t.rath@ifad.org Focal points: Dispatch of documentation: William Skinner Chief Governing Bodies Office Tel.: gb_office@ifad.org Executive Board 119 th Session Rome, December 2016 For: Review

2 EB 2016/119/R.16 Contents Abbreviations and acronyms Map of IFAD-funded operations in the country Executive summary I. Country diagnosis 1 II. Previous lessons and results 4 III. Strategic objectives 6 IV. Sustainable results 8 A. Targeting and gender 8 B. Scaling up 8 C. Policy engagement 8 D. Natural resources and climate change 9 E. Nutrition-sensitive agriculture and rural development 9 V. Successful delivery 9 A. Financing framework 9 B. Monitoring and evaluation 10 C. Knowledge management 10 D. Partnerships 11 E. Innovations 11 F. South-South and Triangular Cooperation 11 ii iii iv Appendices I. COSOP results management framework 1 II. III. COSOP preparation process including preparatory studies, stakeholder consultation and events 3 Natural resource management and climate change adaptation: Background, national policies and IFAD intervention strategies 5 IV. Country at a glance 11 V. Fiduciary summary of country portfolio 14 VI. Concept note 17 Key files Key file 1: Rural poverty and agricultural/rural sector issues 23 Key file 2: Organizations matrix (strengths, weaknesses, opportunities and threats analysis) 24 Key file 3: Complementary donor initiatives/partnership potential 27 Key file 4: Target group identification, priority issues and potential response 31 i

3 EB 2016/119/R.16 Abbreviations and acronyms ASWAp-SP COSOP DCAFS ERASP FARMSE FISP GAP IAP IRLADP M&E PRIDE RLEEP SAPP SSTC SMEs SO Agriculture Sector Wide Approach Support Project country strategic opportunities programme Donor Committee on Agriculture and Food Security Enhancing the Resilience of Agroecological Systems Financial Advancement for Rural Markets, Smallholders and Enterprise Farm Input Subsidy Programme good agricultural practice Integrated Approach Pilot Irrigation, Rural Livelihoods and Agricultural Development Project monitoring and evaluation Programme for Rural Irrigation Development Rural Livelihoods and Economic Enhancement Programme Sustainable Agricultural Production Programme South-South and Triangular Cooperation small and medium-sized enterprises strategic objective ii

4 EB 2016/119/R.16 Map of IFAD-funded operations in the country iii

5 EB 2016/119/R.16 Executive summary 1. Introduction. This country strategic opportunities programme (COSOP) maps IFAD s engagement with the Government of Malawi for the period mid-2016 through mid It builds on COSOP , lessons from IFAD-financed projects, country diagnosis from the literature and consultations with stakeholders. 2. Country context. Malawi has a population of 16.7 million people, of which 85 per cent are rural. Two of three people are under age 25. Population is predicted to further grow to 26 million by The poverty headcount stands at 50.7 per cent, with 30 per cent being severely poor. Poverty is most pronounced in rural areas of the north and south, while it has decreased in urban areas. High rates of malnutrition, paired with some 10 per cent of the population infected by HIV/AIDS, hamper the country s productivity and require high care efforts by family members, especially women. 3. Agriculture is a key sector of Malawi s economy in terms of national income and employment. Pressure on scarce resources results in degradation and deforestation. The extreme weather congruent with climate change has negatively affected food security, leaving 2.8 million people dependent on food aid in early This underlines the vulnerability of the predominantly rainfed production system. The public extension system cannot meet farmer demand, due to a lack of capacity and staff time devoted to the Farm Input Subsidy Programme. 4. The COSOP s strategic objectives are fully aligned with the main relevant policies of the Government: the Second Malawi Growth and Development Strategy; the National Agriculture Policy; and the National Export Strategy. 5. Lessons learned. The COSOP builds on lessons from the four programmes included in the previous COSOP IFAD has proven expertise in delivering good agricultural practices, such as conservation agriculture and adaptation to climate change. Innovations in extension services, such as farmer- and community-led systems, showed good initial results. Small and medium-scale irrigation development and the management of irrigation schemes by water users associations providing smallholders access to irrigated land forms another area of success. IFAD pioneered value chain development successfully in several commodities across a range of actors. The household methodology approach empowered women to make joint decisions. IFAD-funded investments are implemented through government and community structures, thus strengthening capacities at national, district and local levels and improving beneficiary uptake of services. 6. Strategic objectives. COSOP aims at two strategic objectives: (a) (b) Strategic objective 1: Smallholder households become resilient to natural shocks and enhance food and nutrition security. This objective seeks to reduce the vulnerability of smallholder farmers to weather extremes and natural disasters. It will be achieved through investments in: (i) climate-proofed infrastructure, including irrigation and soil and water conservation; and (ii) on-farm technology. The capacities of farmers and their communities will be developed for integrated natural resource management, including irrigation management, and for good agricultural practices, including climate-smart and nutrition-sensitive agriculture, crop diversification, best nutritional practices and post-harvest activities. Nutrition will be mainstreamed in all projects. Strategic objective 2: Smallholder households access remunerative markets and services. This objective seeks to enable smallholder farmers to benefit from agricultural commodity markets. It will be achieved through improved access to rural financial, market and business development services dedicated iv

6 EB 2016/119/R.16 to smallholder farmers. Smallholders will be supported in forming credit and savings associations for accessing financial services. Very poor households will benefit from the Graduation Approach. Financial institutions and value chain partners will be supported in creating business opportunities for smallholder farmers to supply agricultural commodity markets. Producer groups will be assisted in addressing market demands such as product choice, quantity and quality standards. 7. Sustainable results and successful delivery. Investment and non-project activities will focus on economically active poor rural people while creating spin-off for vulnerable, food-deficit households. Mainstreaming of nutrition will directly enhance the well-being of the target group. Positive scaling-up development outcomes will be emphasized through policy engagement and partnership-building. Opportunities under South-South and Triangular Cooperation will be proactively pursued. Climate and natural resource management aspects are addressed in lending programmes through Global Environment Facility and Adaptation for Smallholder Agriculture Programme funding. The monitoring capacity of the Government will be strengthened. Innovation will be driven by grant-funded research and by testing new approaches within projects. v

7 EB 2016/119/R.16 Republic of Malawi Country strategic opportunities programme I. Country diagnosis 1. Country context. Malawi is a small, densely populated country bordered by Mozambique, the United Republic of Tanzania and Zambia. Its climate is tropical, with a rainy season from October to April and a mean annual rainfall ranging from 500 to 3,000 mm. 2. Malawi s population increased from 4 million in 1966 to 16.7 million in 2014, and is expected to grow to 26 million by Two of three people are under 25 years of age. 1 Life expectancy has improved to 62.8 years. 2 The average population density is 177 people per km² (2014), with some areas in the south having over 300 people per km². 3. Malawi is a Least Developed Country, with a 2014 Human Development Index of 0.445, ranking it 174 th of 182 countries. The gross national income per capita fell from US$370 in 2011 to US$250 in 2015, mainly due to a drop in income from export crops. 4. The 2014 gross domestic product (GDP) was about US$4.26 billion, of which per cent derives from industry and per cent from services. Agriculture provides the remaining per cent, but plays a key role. The sector employs 80 per cent of the workforce and is the main foreign exchange earner, through exports of tobacco, sugar, tea, coffee and cotton. Real GDP growth in 2014 was estimated at 5.7 per cent, driven largely by agriculture, with significant contributions from manufacturing, wholesale and retail trade and services. 3 Unemployment stands at 6.6 per cent (2014). Youth unemployment is strikingly high at 40 per cent. 5. Inflation has remained above 20 per cent since 2013 (up from 4.1 per cent in 2007), driven by low crop harvests and subsequent surges in food prices. In 2016 food price inflation was at 28.4 per cent, affecting net food buyers and posing a risk of increased child malnutrition. 4 Annual interest rates for credit are about 27 per cent (13.2 per cent on deposits). 6. The following trends have been observed in national growth and development: (i) average per capita income is increasing, driven by growth in the rural non-farm sector; (ii) urban population growth exceeds rural population growth, but Malawi will remain predominantly rural for the coming decade; and (iii) urban poverty rates are increasing slightly, showing the limited absorption capacity of the urban economy Rural livelihoods. Eighty-five per cent of the population (about 11 million people) live in rural areas and almost all engage in crop and livestock production. Landholdings average 0.8 hectares, with maize being the dominant crop (66 per cent) for smallholders, followed by pigeon pea, groundnuts (16 per cent each) and tobacco (8 per cent). 1 Population Reference Bureau (2014), 2 UNDP, Human Development Report 2014, Malawi summary (New York: United Nations Development Programme, 2015). 3 African Economic Outlook (2015), 4 G.A. Cornia, L. Deotti and M. Sassi, Sources of food price volatility and child malnutrition in Niger and Malawi, Food Policy 60 (April 2016): 20-30; K. Harttgen, S. Klasen and R. Rischke, Analyzing nutritional impacts of price and income related shocks in Malawi, Food Policy 60 (April 2016): P. Dorosh, K. Pauw and J. Thurlow, Contribution of Cities and Towns to National Growth and Development in Malawi (unpublished, International Food Policy Research Institute [IFPRI], Washington, DC, 2015). 1

8 EB 2016/119/R About 51 per cent of the population lives below the national poverty line, 6 with 30 per cent living in severe poverty in Poverty is predominantly rural, with the south and north of the country bearing the main burden. Statistics for rural food and nutrition security are also alarming. Stunting among children averages 42 per cent, and in some districts over 60 per cent. 8 Woman-headed households are more affected by food insecurity, as they usually have smaller resource endowments Despite progress in HIV/AIDS prevention and treatment, 9.1 per cent of the adult population is infected. 10 Poor nutrition and HIV/AIDS prevalence aggravate low rural productivity. Caring for family members also represents an extra burden, especially for women. 10. Rapid population growth reduces family landholdings. Land degradation, 11 deforestation and climate change exacerbate food and nutrition insecurity. 12 Agriculture is increasingly vulnerable to natural shocks. Heavy rains followed by the 2015/16 drought left 2.8 million Malawians dependent on food aid. Agricultural practices are inadequately adapted to intensive land-use and weather extremes. Loss of topsoil from agricultural lands is substantial, largely because of inappropriate management. 11. Rural households provide agricultural labour, which is seasonal and poorly paid, especially for women. Diversification into off-farm activities, for example through small and medium-sized enterprises (SMEs) 13 for value addition, employment, trading and services, offers opportunities to improve livelihoods, reduce vulnerability and employ young men and women. 12. Policies and programmes. Malawi s development vision is outlined in the Malawi Vision 2020, which aims to make Malawi secure, democratically mature, environmentally sustainable, self-reliant with equal opportunities for and active participation by all. Malawi Vision 2020 is translated into strategies and sector policies, and implemented by programmes that are relevant to the country strategic opportunities programme (COSOP). (i) (ii) The Second Malawi Growth and Development Strategy II ( ) is the overarching medium-term strategy for attaining long-term development. It aspires to reduce poverty through sustainable economic growth and infrastructure development, inter alia in agriculture. The National Agriculture Policy ( ) outlines eight priority areas that are fully in harmony with the COSOP strategic objectives: agricultural production and productivity; irrigation development; mechanization of agriculture; agriculture market development, agroprocessing and value addition; food and nutrition security; agricultural risk management; youth and women s empowerment in agriculture; and institutional development, coordination and capacity-strengthening IFAD, Baseline Report on Food Knowledge, Attitude and Practice (KAP) Malawi 2015 (Rome, 2016); and ScalingUp Nutrition (SUN)/Malawi, 9 M. Kassie, J. Stage, H. Teklewolde and O. Erenstein, Gendered Food Security in Rural Malawi: Why is women s food security status lower?, Food Security 7 (2015): Land degradation and subsequent change in land use are estimated to cause economic costs in the range of 6-7 per cent of Malawi s GDP. O.K. Kirui, Economics of Land Degradation and Improvements in Tanzania and Malawi, in Economics of Land Degradation and Improvement A Global Assessment for Sustainable Development, ed. E. Nkonya, A. Mirzabaev, J. von Braun (Cham [ZG], Switzerland: Springer International Publishing, 2016), Draft National Forest Policy of Malawi, 2013 (see appendix III). 13 SMEs include microenterprises and homestead production, as well as minor rural processors and agro-dealers that employ up to 30 people. 2

9 EB 2016/119/R.16 (iii) (iv) Malawi National Export Strategy ( ) pursues growth through oilseed and sugarcane products, and through the processing of dairy, maize, wheat, horticulture and pulses. These commodities will be supported under strategic objective 2. The National Climate Change Programme ( ), in harmony with strategic objective 1, promotes climate change adaptation and mitigation for livelihoods through economic development. 13. The above policies are implemented through government programmes. The Farm Input Subsidy Programme (FISP) aims to contribute to crop production and diversification. 14 Since its inception in 2005, FISP has reached 50 per cent of Malawi s smallholders, but it consumes 80 per cent of the agricultural budget and considerable staff time. It impacts the outreach of extension services and lacks incentives for farmers to boost productivity. The Malawi Agriculture Sector Wide Approach Support Project (ASWAp-SP) aims to coordinate interventions, with a target of 6 per cent annual growth in the agriculture sector. ASWAp-SP is currently being reviewed to address challenges encountered during implementation. Other programmes relevant to the COSOP include the National Irrigation Master Plan and Investment Framework and the National Climate Change Investment Plan. 14. Government capacity to manage and implement programmes is stretched. The World Bank s 2014 Country and Policy Institutional Assessment shows a negative trend for public-sector management. Decentralization provides a network of local institutions and rural services, but the capacity to implement projects and programmes remains limited, and is further compromised by FISP. Private-sector engagement in the rural economy is cautious due to high risks and limited returns. 15. Strategic opportunity. The above situation provides a strategic opportunity for poverty reduction and enhancement of food and nutrition security by IFAD. Poor rural men and women face challenges that the Government of Malawi must respond to adequately. IFAD support can contribute to making government policies more effective. The following are areas in which IFAD s comparative advantage could be well employed: (i) improved targeting of government policies and programmes; (ii) climate-smart agriculture; (iii) smallholder irrigation and catchment management; (iv) mainstreaming of nutrition issues and climate change adaptation; (v) market linkages, value chains and small enterprise development; and (vi) rural financial services. 16. Risks. The main risks for the new COSOP relate to economic downturn, financial governance issues and the effects of climate variability (table 1). 17. Risks related to financial governance increased due to a large government corruption scandal towards the end of 2013 (''cashgate''), which led donors to temporarily suspend development assistance. In terms of public corruption perception, 15 Malawi ranks 112 th of 168 countries, which presents a further deterioration from the 2012 assessment. In a bid to strengthen public financial management systems, the Government has: (i) established independent audit committees for ministry departments and agencies; (ii) carried out a forensic audit of the integrated financial management system (IFMS); (iii) engaged an information technology security officer, based in the Accountant General's Department, to monitor unlawful transactions on the IFMS; (iv) cleared a backlog of government account reconciliations that were last carried out in July 2013; and (v) speeded up the trials of officials implicated in illegal transactions. The full impact of the public financial management reforms must be monitored. 14 C. Arndt, K. Pauw and J. Thurlow, The Economy-wide Impacts and Risks of Malawi's Farm Input Subsidy Program [sic], American Journal of Agricultural Economics (24 August 2015), doi: /ajae/aav Transparency International, 3

10 EB 2016/119/R.16 Table 1 Risks and mitigation strategy Risk Risk level Mitigation strategy Economic downturn Medium Investments in resilience of smallholders aim to strengthen their capacity to cope with macroeconomic effects on their livelihoods Government institutions have insufficient capacities to implement project activities Financial governance, including corruption Medium High IFAD will: strengthen capacities through technical assistance, training, management tools diversify support service delivery, including through the private sector ensure dedicated project coordination structures IFAD will: employ strict fiduciary control measures (e.g. IT-based accounting and reporting, close fiduciary supervision, annual audit) provide training and supervision to project-related staff Adverse climate events Medium IFAD will : invest in various technical areas (irrigation, value chains, rural finance systems) provide training to increase smallholder and public-/ privatesector capacities to adapt to the effects of climate change II. Previous lessons and results 18. The COSOP supported four investment programmes: the Rural Livelihoods Support Programme; the Irrigation, Rural Livelihoods and Agricultural Development Project (IRLADP), which was cofinanced with the World Bank; the Rural Livelihoods and Economic Enhancement Programme (RLEEP) and the Sustainable Agricultural Production Programme (SAPP) as well as 12 regional and country grant-funded projects. The following are the main lessons learned from the loan-funded programmes: Good agricultural practices (GAPs). SAPP promotes GAPs to improve soil fertility and boost production. Results in farmers fields are promising, as yields of rainfed maize increased from 1.3 to 2.2 tons per hectare (t/ha). Among other activities, RLEEP supports double lining and improved storage in groundnuts, which together increase marketable production by 50 per cent. Climate-smart agricultural practices that can boost better nutrition, underpinned by an efficient use of weather information, are highly relevant. As the irrigated area expands, the need for GAPs adapted to irrigated farming increases. Better post-harvest practices are also needed to boost the marketability of produce along a ''farming as a business'' perspective. Public extension services use the lead farmer and farmer field school approaches, and the IFAD-funded projects (IRLADP, SAPP, RLEEP) support these. The projects report improved outreach and adoption rates, and have helped refine the approaches, for example by introducing farmer's business schools and community animal health workers. The effectiveness of extension services could be further increased through complementary services by non-governmental and private service providers. Sustainable irrigation development enhances yields and cropping intensities. In IRLADP, maize yields increased from 1.6 to 3.4 t/ha. Cropping intensity increased in new irrigation schemes, especially in small ones, from 80 per cent (baseline) to 160 per cent. Water users associations ensure long-term management, secure smallholder access to land and enable contract farming. New irrigation projects need to build on IRLADP s approach to securing land 4

11 EB 2016/119/R.16 access. Catchment soil and water management are important in sustaining the irrigation infrastructure and ecosystem. Value chain development. RLEEP works with a range of value chain actors including farmers, the private sector, and the National Smallholder Farmers Association of Malawi (NASFAM). RLEEP s approach to value chain development started with a national mapping exercise, followed by a consultative process to identify potential commodity chains. An innovative process has recently begun in which private-sector companies identify the value chains and their restrictions. Private companies can apply for matching grants to address value chain issues, similar to IFAD s public/private/producer partnership approach. Economic modelling by IFAD and the International Food Policy Research Institute confirms the potential for value chain development, including for biofuels and cash crops. 16 Rural finance. Limited access to rural finance services constrains agricultural development. The COSOP provided some support to improving access to rural finance, such as support to village savings and loan associations. However, farmer demand exceeds available services and credit remains expensive. The need for an innovative approach to rural finance is recognized, Consequently, a rural finance development project is proposed for the new lending pipeline (appendix VI). Climate change and vulnerability to external shocks. Climate change in densely populated parts in southern Africa is estimated to cause yield losses of about 20 per cent by Climate change has become a reality for Malawi s largely rainfed agriculture, as evidenced by the 2015/16 floods and droughts. Smallholders are particularly vulnerable to climate effects, and the promotion of GAPs should include climate-smart options, such as the use of weather forecasts. Investment in irrigation and climate-proof infrastructure should be complemented by adequate catchment management (appendix III). Nutrition and food security. The outcome of IFAD s Food Knowledge Attitude and Practices survey 18 provided a baseline for the COSOP in mainstreaming nutrition. The need for a more rigorous nutrition intervention was confirmed, and districts with high rates of stunting should be targeted. Project interventions should lead to improved feeding practices for infants and young children and should ensure regular growth monitoring and promotion to identify risks for remedial intervention at an early stage. All projects should be nutrition-sensitive, which could entail promotion of: (i) nutritious plant products for subsistence and in value chains; (ii) good post-harvest and food processing technologies; and (iii) awareness through large-scale campaigns and household-level training. Project management. During , project start-ups were slow, due to late fulfilment of effectiveness criteria. Experiences in project management are mixed: SAPP has been managed by the Ministry of Agriculture, and staff members were not fully dedicated to the programme. This has negatively affected performance, causing a three-year delay. RLEEP has a dedicated coordination unit that performs well, under the oversight of the Ministry of Local Government. The lesson learned is that a fully dedicated management unit enables efficient project implementation. 16 R. Benfica and J. Thurlow, Development of a Rural Investment and Policy Analysis (RIAPA) Modeling Toolkit (PowerPoint presentation, IFAD Learning Day Workshop, Rome, 25 February 2016). 17 T. Wheeler and J. von Braun, Climate change impacts on global food security, Science 134 (2013): See also IFAD, Survey on Food Knowledge, Attitude and Practices in Rural Livelihoods and Economic Enhancement Programme and Sustainable Agriculture Production Programme, Malawi (Rome, 2015), operations.ifad.org/.../01b9a47bb1e6-4e a

12 EB 2016/119/R.16 III. Gender and targeting. In IRLADP, the household methodology approach helped households arrive at joint decisions on crops, revenues and household resources. The methodology is inclusive and addresses gender equality, while respecting household diversity. The vulnerable and poor, often more affected by the impact of HIV/AIDS, have different needs than do more commercially oriented farmers. Poor households need stabilization of their livelihoods, including through inputs for assets, promotion of labour-saving cropping technologies and good nutrition. Policy engagement. The COSOP portfolio was well aligned with government policies, but results were not systematically used to inform policymakers. Donor coordination and policy dialogue on agriculture in Malawi are undertaken through the Donor Committee on Agriculture and Food Security (DCAFS) and through the ASWAp. IFAD s limited in-country presence has hampered its regular participation in DCAFS. Alternative arrangements should be employed to ensure a steady transfer of project-based knowledge to policymakers and development partners. Strategic objectives 19. IFAD has a comparative advantage in transforming smallholder agriculture by linking improved service delivery to community organizations. Its approach in Malawi is to: (i) work with and strengthen district-level government services; and (ii) deliver those services via community organizations to smallholder farmers. This combines technological innovations in smallholder farming with social innovations in the relationships between smallholders and agricultural services. The latter takes place at both ends i.e. in the communities and in the service delivery system and helps establish relationships that continue beyond project completion. 20. Malawi s rural poverty, food and nutrition insecurities provide a context within which IFAD s comparative advantage can be applied. The country addresses this situation by creating economic opportunities for smallholders and by enhancing their resilience to external shocks. Resilience and commercialization thus form the twin strategic objectives of the IFAD programme Strategic objective 1: Smallholder households become resilient to natural shocks and enhance food and nutrition security. This objective seeks to reduce the vulnerability of smallholder farmers to weather extremes and natural disasters and to improve their food and nutrition status. It will be achieved through investments in: (i) climate-proofed infrastructure, including irrigation and soil and water conservation; and (ii) on-farm technology. The capacities of farmers and their communities will be built for integrated natural resource management, including irrigation management, and for GAPs, including climate-smart and nutrition-sensitive agriculture. Nutrition has a pivotal role in improving livelihoods. Improved food and nutrition security will be achieved by influencing farmers choices towards more nutritious crop and livestock production, enhanced post-harvest handling and processing, and preparation of nutritious food. Best practice will be promoted through large-scale campaigns. Government and private service providers will be supported in delivering technology and infrastructure, whereas smallholder farmers will be supported in establishing groups that manage catchment, forest, rangeland, water and land resources, and that test and replicate new agricultural practices. As this objective matches technical improvements to natural resource systems, investments will be developed and delivered through a landscape approach. 22. Strategic objective 2: Smallholder households access remunerative markets and services. This objective seeks to enable smallholder farmers to benefit from agricultural commodity markets. It will be achieved through improved access of smallholders to rural financial, market and business development services. Smallholders will be supported in forming credit and savings associations 6

13 EB 2016/119/R.16 for accessing financial services, and producer groups in responding to market demands in terms of product type, quantity, quality and delivery. Very poor households will be enabled to benefit from financial services through the Graduation Approach. 19 Financial institutions and value chain partners will be supported in creating business opportunities for smallholder farmers. Business development services will strengthen market linkages that benefit smallholders and their organizations. Value addition will increase income from on- and off-farm activities and provides opportunities for SMEs and off-farm employment. The enterprises to be supported include ''green businesses'', such as the local manufacturing of fuelwood-saving cook stoves. Rural youth will be specifically targeted for off-farm business opportunities such as services and manufacturing. Strategic objective 2 will be realized though a value chain approach that enhances the linkages between producers, financiers and markets. 23. Theory of change. The main causes of poverty and food and nutrition insecurity among the rural population lie in the vulnerability to external shocks. The predominant rainfed agriculture is prone to natural shocks such as drought and flooding, which destroy livelihoods for years, pushing people into destitution and hunger. Natural resources, including arable land, have degraded through overuse and poor management. Smallholders are price takers and face difficulties in adjusting to changing market demands and prices. The COSOP aims to tackle these root causes through the two strategic objectives. The combination of strategic objective 1 (resilience to natural shocks and enhanced food and nutrition security) and strategic objective 2 (improved access to remunerative markets and services) will enhance the incomes, nutrition, and well-being of rural people (figure 1). Both strategic objectives will be pursued by a portfolio of investment projects and by non-project activities that seek to enhance the effectiveness of individual projects. Figure 1 Summary of COSOP results framework logic

14 EB 2016/119/R.16 IV. Sustainable results A. Targeting and gender 24. The COSOP aims to reach about 600,000 poor rural people, mainly through ongoing (SAPP, RLEEP) and new projects (Programme for Rural Irrigation Development [PRIDE], Enhancing the Resilience of Agroecological Systems [ERASP], Financial Advancement for Rural Markets, Smallholders and Enterprise [FARMSE], and a sixth project to be determined for the lending cycle ). 25. While the COSOP is countrywide, it will pay specific attention to areas with high poverty rates and that are prone to adverse climate effects. It targets poor smallholders, encompassing economically active and food-secure households, food insecure households and very poor households. The household methodology constitutes the backbone of its approach to gender equality. All target group categories are expected to benefit from irrigation development, land conservation, GAPs, training in food and nutrition security, and fuelwood-saving stoves. In addition, very poor households and poor woman-headed households will be assisted through the Graduation Approach under FARMSE, while food-secure and economically active households will benefit from value chain activities, such as market-led production and access to financial services. New opportunities for off-farm services and manufacturing will be offered to youth. Projects will analyse their target groups through categorization congruent with the COSOP (see key file 4) or with its further refinement. B. Scaling up 26. The scaling-up strategy in Malawi aims to influence key drivers of change through evidence-based knowledge products, policy engagement and strategic investments. Partnerships with the Government, development partners, private-sector and producers organizations (in particular, NASFAM and its 50 member associations) will enable scaling up through sharing knowledge, leveraging resources and replicating successful solutions. IFAD will closely collaborate with DCAFS members to pursue joint scaling-up strategies through government programmes, as well as leveraging private-sector resources, as was piloted in RLEEP. 27. The limited access of smallholders to rural financial services limits scope for successful scaling up, although community member-based financial institutions (CMBFIs) and value chain finance models are growing fast. IFAD will invest in this strategic area in partnership with the formal financial sector, the Reserve Bank of Malawi and development partners such as the German Agency for International Cooperation (GIZ) to boost CMBFIs and unleash the development potential of smallholders and rural SMEs. C. Policy engagement 28. The policy engagement agenda is linked to the strategic objectives and will be enhanced by effective partnerships and knowledge management. IFAD will strengthen its engagement within DCAFS on issues affecting smallholders and will engage directly with government. DCAFS is a platform to support the Government in FISP reform and other agriculture-related issues. Moreover, the results and lessons learned from SAPP will inform DCAFS partners and the Government in their adjustments to the agricultural extension policy. 29. The Government will be assisted in updating its climate change and environmental policies and safeguards, including land tenure issues. It has adopted a revision of its safeguards in view of the oncoming PRIDE and ERASP programmes. This process will continue and will be deepened through regular environmental audits, lessons learned and public hearings to link farmers and policymakers. 30. RLEEP and FARMSE will contribute to intensifying public/private/producer partnerships to bring more smallholders into commercially oriented agriculture. 8

15 EB 2016/119/R.16 Policy issues refer to incentives for the private sector to engage with smallholders at input and output markets. Finally, the programmes under the COSOP will strengthen government capacity for monitoring and evaluation to support evidence-based policymaking. D. Natural resources and climate change 31. Malawi s climate change policy pursues adaptation and mitigation in agriculture. IFAD s portfolio furthers the policies through investments and policy engagement under strategic objective 1, such as inclusion of climate-smart options among GAPs and the proposed Global Environment Facility (GEF)-funded Integrated Approach Pilot (IAP) activity ERASP. 32. The Social, Environmental and Climate Assessment Procedures study (appendix III) proposes to address degradation through integrated catchment restoration and management. This perspective will inform ongoing and new projects such as PRIDE and ERASP. Existing approaches will be institutionalized (e.g. fuelwood-saving stoves) and new ones will be explored (e.g. biogas). E. Nutrition-sensitive agriculture and rural development 33. The Government joined the Scaling Up Nutrition movement and established a national nutrition committee to support implementation of the Food and Nutrition Security Policy (2005) and the National Nutrition Policy and Strategic Plan ( ). 34. In support of this, the COSOP will mainstream nutrition as a means to boost well-being and enhance the resilience of poor smallholder families through its programmes, with a focus on adult and young women. Mainstreaming connects nutrition activities with suitable project activities under both strategic objectives. Examples include promotion of: (i) nutrition-sensitive value chains, which would include farmer sensitization to selecting more nutritious crops and livestock products for sustenance and as cash earners; and (ii) homestead food production through the promotion of kitchen gardens, small livestock rearing, etc. 35. Investments at the household level will be complemented by nutrition education and large-scale campaigns targeting households and policymakers alike. Topics include dietary diversity, taking the main causes of stunting into consideration (e.g. early pregnancies, inadequate breastfeeding practices, maternal nutrition, food preparation and preservation, and hygiene and sanitation). 20 The type of support will be adjusted to the specific needs of the subsets of the target group. 36. Additional efforts will be made to work with specialized partners such as the Food and Agriculture Organization of the United Nations and the United Nations Children s Fund, and to use grants to explore innovative approaches, such as nutrition-conserving practices in post-harvest processing. V. Successful delivery A. Financing framework 37. The COSOP covers two cycles of IFAD s performance-based allocation system (PBAS and ). The PBAS forecasts IFAD financing for to be US$42 million (table 2). The first project, FARMSE, will absorb the entire allocation, while a second project is envisaged for PBAS See also IFAD, Survey on Food Knowledge, Attitude and Practices in Rural Livelihoods and Economic Enhancement Programme and Sustainable Agriculture Production Programme, Malawi (Rome, 2015), operations.ifad.org/.../01b9a47b-b1e6-4e a

16 EB 2016/119/R.16 Table 2 PBAS forecast for COSOP Financing terms 2016 DHC GNI per capita Rural population IRAI Rural sector performance (RSP) Project assessment rating (PAR) 2015 Country performance rating annual allocation annual allocation annual allocation Total ( ) Note: DHC = DSF grant and HC loan (50 per cent each); IRAI = World Bank IDA Resource Allocation Index. 38. Table 3 presents the low- and high-case PBAS scenarios. It shows that a poor PAR and poor RSP would reduce the PBAS allocation by 26 per cent. This would curb IFAD financing to about US$31 million, affecting the magnitude of new projects. Table 3 Relationship between performance indicators and country score Financing scenario PAR rating (+/- 1) RSP score (+/- 0.3) Percentage change in PBAS country score from base scenario Hypothetical low case % Base case % Hypothetical high case % 39. Additional funding of the project portfolio includes government, private-sector and beneficiary contributions. IFAD administers funds from the OPEC Fund for International Development and the GEF-funded IAP programme (a pan-african platform for identifying and sharing solutions on climate resilience and sustainable approaches to food security). Efforts will be made to cofinance with other development partners, and grant funds may be mobilized from IFAD s regional grant programme. B. Monitoring and evaluation (M&E) 40. The COSOP aims to strengthen government capacity to effectively monitor the performance of its investments. The COSOP results framework includes: outcome and milestone indicators against which achievements will be reported annually from the projects M&E frameworks; reports on non-project activities; and additional surveys. All projects have dedicated monitoring systems to track outputs and assess outcomes and impact. COSOP indicators will be unified across the portfolio, as will target group categorization. Data will be disaggregated by category, gender and age. IFAD and the Government will hold annual and midterm reviews to assess progress, draw lessons and make adjustments as needed. C. Knowledge management 41. Knowledge management, in conjunction with partnerships, will play a strong role in IFAD engagement in policy dialogue and in scaling up. The projects form the basis for knowledge management, as they gather success stories, identify key issues and project staff participate in programme review sessions. Knowledge management activities will include thematic studies, such as the current analysis of extension modalities undertaken through RLEEP. To set up efficient management of knowledge, a dedicated knowledge management specialist, possibly from IFAD s new regional hub, will be engaged. 10

17 EB 2016/119/R.16 D. Partnerships 42. IFAD aims to become a credible partner in policy dialogue. Besides effective knowledge management, this requires regular interaction with partners, including government, development agencies, the private sector and farmers organizations. Partnership will be instrumental in policy advocacy, scaling up, cofinancing and linking farmers with the private sector. IFAD will thus interact more regularly with DCAFS and will follow developments in the Scaling Up Nutrition movement. E. Innovations 43. The COSOP will scale up innovations from IFAD-funded projects (e.g. improved groundnut storage, the household methodology and post-harvest techniques). Many such innovations were introduced through grants and subsequently piloted in projects. In addition, projects will have budgetary resources to adopt new technologies and approaches to enhance target groups livelihoods (e.g. catchment management and CMBFIs). 21 IFAD grant funding will be used to scout for innovations, including crop insurance and renewable energy. F. South-South and Triangular Cooperation 44. South-South and Triangular Cooperation (SSTC) opportunities will be pursued in a proactive manner and linked with the scaling-up agenda. They will include exchange visits, study tours and other forms of learning and technology transfer for example, regular exchange visits with project staff from Zambia and training through the Value Links approach promoted by GIZ. Project activities could be attached to the grant for Strengthening Capacities and Tools to Scale Up and Disseminate Innovations in order to develop associated learning routes. Expanding the subregional focus will be part of the new IFAD decentralization agenda, for example by connecting countries through knowledge fairs. 45. At the policy level, IFAD will broker and organize study tours and exchanges between policymakers from Malawi and other developing countries. The GEF-funded, pan-african IAP would serve as a mechanism for testing policy-related solutions. 46. SSTC activities will be funded through new regional grants, supplementary funds and project budgets for knowledge management. Malawi will seek support from the unrestricted complementary contribution made by the Government of China to SSTC activities. On a larger scale, participation in SSTC events in Asia and Latin America will be pursued. 21 CMBFIs, see concept note in appendix VI. 11

18 1 COSOP results management framework Country strategy alignment What is the country seeking to achieve? Malawi Growth and Development Poverty Reduction Strategy (MGDS II): Sustainable economic growth; social development; disaster risk management; infrastructure development; governance; gender and capacity development. National Agriculture Policy ( ): Sustainable agricultural production; sustainable irrigation development; agriculture market development, agro-processing and value addition; food and nutrition security; agricultural risk management; youth and women empowerment in agriculture; institutional development, coordination and capacity development. National Export Strategy ( ): Strategic objectives SO1: Smallholder households become resilient to natural shocks Key results for RB-COSOP (Jul Jun 2019) How is IFAD going to contribute? Outcome indicators Milestone indicators gender, wealth and age disaggregated gender, wealth and age disaggregated 15,400 smallholder households with 4,400 ha of land under irrigation long-term tenure security for at least schemes constructed or rehabilitated 0.1 ha of newly irrigated land; 15,400 smallholder households 9,350 hectares of agricultural land associated into newly formed and improved through soil and water trained groups for managing conservation measures (excluding infrastructure irrigation); 28 groups in NRM formed and 35,200 smallholder households strengthened adopting one or more recommended 39,000 smallholder farmers trained in good agricultural practices good agricultural practices 23,500 smallholder farmers (at least 55 new or adapted good agricultural 30% female) reporting an over 20% practices including CSA, postproduction, production increase from improved irrigation and nutrition practices included in the MoAIWD extension 14,000 smallholder households programme reporting decreased incidence of hunger, measured by the number of meals per day 22 Periods quoted reflect (assumed) effectiveness until completion. For result targets, proportional contribution according to time overlap between the RB-COSOP and the project is assumed, following Malawi fiscal year for the RB-COSOP s first three years (Jul Jun 2019). Indicative lending and nonlending activities for the next 3 years 22 Lending/investment activities: RLEEP (Oct 2009 Dec 2017) SAPP (Jan 2012 Mar 2021) PRIDE (Jul ) ERASP ( ) FARMSE ( ) VC project (tbd) ( ) B) Non-lending / non-project activities: Policy dialogue Knowledge management Partnership building South-south and triangular cooperation, grants and reimbursable technical assistance Appendix I EB 2016/119/R.16

19 2 Country strategy alignment What is the country seeking to achieve? support export oriented clusters and diversify country s export, especially through promotion of oil-seeds and sugar cane products, as well as agro-processing of dairy, maize, wheat, horticulture and pulses; develop a conducive environment for youth, women, farmers and SMEs; invest in supportive economic institutions and organizations to build the productive base of the economy, and significantly strengthen skills, competencies and knowledge. Strategic objectives SO2: Smallholder households access remunerative markets and services Key results for RB-COSOP (Jul Jun 2019) How is IFAD going to contribute? Outcome indicators Milestone indicators gender, wealth and age disaggregated gender, wealth and age disaggregated 5,500 smallholder households associated into newly formed and trained producer groups Eight commodity platforms active and operationally self-sufficient 8,250 smallholder households associated in newly formed and trained saving and credit groups annual smallholder loan portfolio enabled by the projects surpassing USD 1.0 million 23,000 smallholder farmers trained in post-production, processing and marketing 16,500 smallholder farmers trained in business and entrepreneurship (above orientation level) 3 commodity platforms initiated and strengthened 5 financial institutions participating in the project portfolio Indicative lending and nonlending activities for the next 3 years 22 Appendix I EB 2016/119/R.16

20 Appendix II EB 2016/119/R.16 COSOP preparation process including preparatory studies, stakeholder consultation and events 1. Overview The RB-COSOP for Malawi expired in ESA management decided to use this as an opportunity to take stock of the results obtained and issues encountered by the country programme and to identify areas that deserve a scaling-up or a change. In short, a COSOP Completion Review and the design of a new RB-COSOP were initiated. In May 2015, FAO-TCI fact finding mission collected the results of IFAD investments that were implemented between , and obtained views of Government of Malawi and relevant stakeholders on the projects and IFAD s performance. As per IFAD s SECAP an in country assessment was carried out in August Its recommendations and results have been reflected in the final RB-COSOP. An overview of the main milestones of the RB-COSOP design process can be obtained in Table 1 below. Table 1: Milestones of the RB-COSOP design process Date Purpose June 2015 RB-COSOP completion mission Aug 2015 SECAP in-country assessment 9 Sept In-country consultation Feb 2016 Inception mission of FARMSE 28 April 2016 CPMT at IFAD HQ 9 and 11 August In-Country consultations 20 September 2016 RB-COSOP Approval October 2016 RB-COSOP endorsement by Government December 2016 Presentation to the Executive Board 2. RB-COSOP Completion Review A RB-COSOP Completion Review (CCR) summarises the main results obtained by the IFAD project portfolio and non-project activities. The main findings were shared for discussion with the Government and other stakeholders at the 1. RB-COSOP consultation workshop held on 9 September in Lilongwe. The final draft CCR has been reviewed by GoM and IFAD management and is published together with the RB-COSOP The main comments raised refer to the need of a consistent monitoring and performance evaluation of projects, such as the recent review of the Rural Livelihood Support Programme, and the IFAD country programme to identify successful interventions and scale them up through larger investments and policies. IFAD is perceived as a leading institution for smallholder agriculture and thus, it is important development partner for government. 3. RB-COSOP Stakeholder Consultations Four RB-COSOP consultations were held in Malawi. In September 2015, a workshop was organised with Government, private sector and NGOs to discuss the strategic positioning of IFAD with development partners. A second workshop was held with the Donor Committee for Agriculture and Food Security (DCAFS). A similar set up of two distinct consultations was chosen in August 2016 to present an advanced draft RB-COSOP to the same stakeholder groups in two separate meetings. The feedback received in all four meetings is summarized as follows. Overall, the strategic objectives of the RB-COSOP were endorsed as very relevant. It was suggested that the RB-COSOP would cover The alignment with relevant policies was commended and updates were provided as regards to the Malawi Growth 3

21 Appendix II EB 2016/119/R.16 and Development Strategy III, and the National Climate Change Investment Plan, which will guide the design and implementation of forthcoming projects. Besides policy dialogue, the RB-COSOP consultations enable forward planning and harmonization with strategies and investments by other DPs. It was suggested that IFAD should be more engaged in policy dialogue, given its specialization in smallholder agriculture. A permanent country presence would be helpful in this regard and most welcomed. For the RB-COSOP , it was suggested that emphasis should to be placed on value chain development, alongside support to farmer organizations, diversification to food and cash crops that a market value, e.g. potato and legumes. Interventions to support food and nutrition security are important and should be mainstreamed. Irrigation is key to enhance smallholder production and climate change resilience among smallholders. IFAD should invest in smallholder irrigation and link these to remunerative markets (like it is design for PRIDE) while other DPs are supporting road infrastructure. In the same vein, climate proofing of existing infrastructure and irrigation schemes should be considered. Private sector would benefit to better understand how they could engage with IFAD-funded projects. Good Agricultural Practice (GAP) and diversification needs to be promoted and linked too value chains. There is a need for re-focus of agricultural extension on GAPs, marketing and climate adaptation. More resources and a diversification of extension service approaches is needed to render services to farmers more efficiently. The latter will require also developing opportunities to increase farmers access to inputs and services. Communities require incentives and technical support to carry out NRM related activities. The meeting endorsed that support to smallholders access to financial services is important for smallholders to effectively participate in value chains and expand their production and business. Improved access to rural financial services was already included in the previous RB-COCOP , but not supported by a project. A concept note for the FARMSE project was prepared in February (see Appendix VIII). It should be linked with existing rural finance projects such as those supported by USAID and GIZ. Finally, start-up delays of projects is reported to be a frequent issue and close start-up support will be required during the first few months or year of a project. Institutions met during the COSOP preparation process include: Government of Malawi Ministry of Finance, Economy and Development Planning Ministry of Agriculture, Irrigation and Water Development ASWAp Secretariat Ministry of Local Government and Rural Development Ministry of Natural Resources, Energy and Mining Ministry of Fisheries National Youth Council Civil Society Organizations National Smallholder Farmers' Association of Malawi (NASFAM) Total Land Care (TLC) AGRA Private Sector Export & Trading Company Development Partners The World Bank EU WFP UNDP FAO AfDB USAID Flanders/Belgium Norway Denmark DFID/UK GIZ/Germany JICA Ireland 4. CPMT consultations The COSOP was developed under active participation of the in-house CPMT, drawing on IFAD s diverse technical expertise. A CPMT was held in 28 April 2016, to brief CPMT members on current status and to obtain feedback on the draft RB-COSOP. The final draft RB-COSOP was shared in August 2016 to prepare for the review by the OSC. 4

22 Appendix III EB 2016/119/R.16 Natural resource management and climate change adaptation: Background, national policies and IFAD intervention strategies Background Republic of Malawi Social, Environmental and Climate Assessment Preparatory Study Main Findings The International Fund for Agricultural Development (IFAD), in collaboration with counterparts in the Government of Malawi (GoM), has prepared this Social, Environmental and Climate Assessment Preparatory (SECAP) Study to provide the analytical underpinning necessary to ensure environmental and social sustainability and climate adaptability in its country programme in Malawi. The SECAP Study supports the development and decision-making process for IFAD s new Results-Based Country Strategic Opportunities Programme (RB-COSOP) for Malawi, , and establishment of outcome-driven national development strategies and systems that address sustainable environmental and natural resources management (ENRM), promote greater social equity in rural communities and encourage appropriate measures for adaptation to, and where feasible, mitigation of climate change (CC), as reflected in the Government s existing sustainable national development policies, environmental action plans and climate change strategies. Main environmental, social and climate change challenges Based on the SECAP Study team s review of the available documentation and discussions with key stakeholders at the national, district, and local levels, the team identified the following as the principal environmental, social and climate change issues and priorities for the SECAP Study to focus on. Land degradation. The increasing degradation of land resources, particularly forested and arable lands in the critical catchments and watersheds across the country, resulting from continuous cultivation on the same land, encroachment into marginal land and protected areas, deforestation, soil erosion and loss of soil fertility, was consistently identified by stakeholders as a priority concern 23. Pressure on its land resources. Being one of the most densely populated countries in continental Africa, Malawi faces more pressure on its land resources now than ever before. Given the high number of births per woman the population will continue to increase steadily. Deforestation. Closely linked to land degradation, the increasing loss and degradation of forest resources, particularly around rural villages and in upper catchments and watersheds, was also identified as a priority concern 24. Loss of forest and fisheries biodiversity. Invasive fish species, overfishing of lake fisheries, coupled with the loss of fisheries habitat, and the overcutting of forest resources, threatening the rich biodiversity of these resources, was also recognized as a priority concern 25. Impacts of climate change and variability. The perceived impacts on rural food security and livelihoods dependent on natural resources of climate change (increasing occurrence of extreme weather events) and variability 23 National Action Programme for the United Nations Convention to Combat Desertification (2001), Malawi State of Environment and Outlook Report (2010), Second National Communication (2011), Climate Change Vulnerability Assessment (2013). 24 Ibid. 25 National Biodiversity Strategy and Action Plan (2006), Ibid. 5

23 Appendix III EB 2016/119/R.16 (unpredictability of temperature and precipitation), particularly in fragile catchments and watersheds, were often raised as a priority concern 26. Water scarcity/stress. The increasing reduction in surface water resources (perennial rivers becoming seasonal) in catchments and watersheds across the country and resulting threats to groundwater resources were consistently a priority concern 27. Analysis of strategic orientation for the RB-COSOP IFAD s past RB-COSOP, developed in 2009 to cover the period from , focused on improving access for the poor in rural communities to appropriate technologies and services for sustainable NRM and increasing access to sustainable agricultural input and produce markets. To some extent, the IFAD portfolio developed under this RB-COSOP has addressed these environmental, social and climate concerns. Despite these indications of progress in addressing environmental, social and climate concerns under the past RB-COSOP, there remain opportunities for improving the performance of IFAD s country programme in these areas under the new RB-COSOP. The Mid-Term Review of the current RB-COSOP performed in 2013 found that the design of the new programmes (RLEEP and SAPP) reflected the RB-COSOP s strategic objectives, but it presented less than convincing evidence that these programmes effectively incorporated measures to ensure sustainable NRM, social equity CC risk management and adaptation. In fact, one of the key conclusions of the RB-COSOP Mid-Term Review and Scaling-up Workshop held in Lilongwe in March 2013 was that Implementation and management of the RB-COSOP are generally satisfactory but improvements can be made in key areas of capacity enhancement and technical and environmental risk management. 28 The new RB-COSOP launched in 2016, should renew IFAD s commitment to addressing Malawi s priorities in ENRM, social equity and CC adaptation/ mitigation in rural areas. This SECAP Study is designed to ensure that these considerations are mainstreamed into IFAD s new RB-COSOP and its subsequent country programme. To this end, the SECAP Study proposes a strategic objective addressing these priorities to guide the overall strategic orientation of the new RB-COSOP. SECAP strategic objective Promote an integrated catchment restoration and management approach in the future country programme in order to ensure priorities in environmental sustainability, rural social equity and climate adaptation/mitigation are effectively integrated into the strategic objectives of the forthcoming RB-COSOP. Transition from traditional sectoral project approaches (i.e. agriculture, irrigation, access to markets/financial services) to a holistic landscape approach to country programme interventions; Incorporate appropriate social, environmental and climate change measures consistent with IFAD s mandate to address poverty reduction and food insecurity in rural areas; and Ensure implementation at the full catchment level on a community-driven basis involving the range of stakeholders and civil society organizations. The integrated catchment restoration and management approach the SECAP Study recommends is intended to push IFAD s interventions to address Malawi s environmental, social and climate priorities in a more holistic and landscape-based manner. The extensive land degradation the SECAP team witnessed in the catchments it visited demands a holistic intervention that addresses the particular social, environmental 26 Ibid. 27 Ibid. 28 IFAD, Aide-Memoire of the RB-COSOP Midterm Review and Scaling-up Workshop, in Country Strategic Opportunities Programme (RB-COSOP) Midterm Review (Rome: IFAD, November 2013), appendix 1, p

24 Appendix III EB 2016/119/R.16 and climate conditions in the broader landscape. These degraded catchments require restoration first and foremost in order to properly renew their environmental functions and then they need integrated land and water management from top to bottom in order to maintain their environmental services. This will require integrating conservation of the forest resources protecting the water source at the top of the catchment with more efficient, climate-smart management of the water resources once they reach the agricultural lands at the bottom of the catchment. This landscape approach is fully consistent with promoting ecosystem resilience identified in the Policy Priority Area for Climate Change Adaptation in Malawi s National Climate Change Policy (2015) and with the Integrated Watershed Management Programme identified as one of the priority climate change adaptation investments in the National Climate Change Investment Plan ( ) 29. The transition from traditional sectoral project approaches is critical to addressing these priorities because it is apparent to the SECAP team that IFAD s agriculture, irrigation and market/financial access project approaches cannot fully meet the diverse combination of challenges (natural resource conservation, income-generation, climate adaptation) that exist in most rural areas. As successful as these sectoral projects have been, their narrow sectoral focus and limited scope target specific concerns and will never be able to deal with the multi-layered challenges all the catchments face. For example, the SAPP has been successful in introducing conservation agricultural practices to smallholder farmers in its project areas, but it stops short of addressing critical upstream threats to the water sources smallholder farmers depend on. The catchment approach will allow IFAD to incorporate the range of appropriate environmental, social and climate change measures to address priorities in a holistic manner while targeting poverty reduction and food insecurity in rural areas. For example, the environmental measures would almost certainly include investments in catchment restoration, integrated water resources management, and soil and water conservation (e.g. contour ridging, agroforestry and water harvesting), as well as technical support for climate-smart agricultural practices, environmental monitoring, and institutional strengthening for NRM/catchment committees 30. The social measures should include promotion of off-farm income generation through alternative livelihoods (e.g. linking aquaculture to irrigation schemes where feasible; promoting household livestock husbandry, particularly small animals, ruminants; and developing beekeeping operations for honey production where the market allows), access to financial services and agricultural markets. Climate measures should include investigating the feasibility of alternative (renewable) energy sources and technologies for cooking and brick making at the village level 31, promoting afforestation, reforestation and vegetation cover as part of catchment restoration 32, and improving climate monitoring at the district and village level along with the dissemination of critical climate information to smallholder farmers on a regular basis. Finally, the stakeholders who attended the mission s public consultation in Lilongwe strongly endorsed the SECAP team s catchment approach, emphasizing the importance of ensuring implementation at the full catchment level on a community-driven basis. This would involve the range of stakeholders and civil society organizations in planning, designing, implementing and monitoring any IFAD intervention in the catchment and build on the existing institutional arrangements at the district, area and 29 Ministry of Environment and Climate Change Management, National Climate Change Policy (Lilongwe, 2015), 14; and National Climate Change Investment Plan ( ) (Lilongwe, 2013), 6-8 ( Lilongwe: Government of Malawi, Ministry of Environment and Climate Change Management). 30 These measures are consistent with the investments for Improving Climate Change Community Resilience through Agriculture Production, described in the National Climate Change Investment Plan ( ), These are among the specific objectives of the Enhancing Energy-Saving Technology Programme, identified as a priority climate-change mitigation investment in the National Climate Change Investment Plan ( ), These are among the climate mitigation investments for Enhancing Reduction of Emissions from Deforestation and Forest Degradation (REDD+), in the National Climate Change Investment Plan ( ),

25 Appendix III EB 2016/119/R.16 village levels (e.g. District Council, District Executive Committee (DEC), Area and Village Development Committees). This is consistent with the institutional arrangements and implementation plan described in the National Climate Change Policy (2015) and follows the decentralization structure described in the National Climate Change Investment Plan ( ). In addition, this SECAP Strategic Objective should ensure that the new RB-COSOP will contribute to the objectives of United Nations in Malawi as expressed by the United Nations Development Assistance Framework (UNDAF) 33. The UNDAF provides a comprehensive framework and approach for coordinating United Nations collaboration with the GoM. The new RB-COSOP should be consistent with and contribute to the first of the four UNDAF priorities areas identified, i.e. National policies, local and national institutions effectively support equitable and sustainable economic growth and food security by This priority area includes promotion of improved management and conservation of natural resources in the context of rapid and debilitating climate change. Proposed priority strategic actions Pursuant to the SECAP strategic objective proposed above for reorientation of the new RB-COSOP, the SECAP Study also identifies a number of concrete actions for the RB- COSOP preparation team to consider in its work. These actions obviously build on the SECAP strategic objective and should be viewed as initial ideas for implementation of the strategic objective. The new RB-COSOP will identify a number of new strategic objectives based on IFAD s experience in implementation of the current RB-COSOP, changing circumstances/needs in the agricultural sector of Malawi, priorities identified by the GoM and IFAD s particular niche and comparative advantage in Malawi. In order to ensure that the SECAP strategic objective informs these new RB-COSOP strategic objectives, the SECAP Study recommends the below actions for the RB-COSOP team to consider. Ensure that the RB-COSOP strategic objectives promote, to the extent practicable, a catchment restoration and management approach in the future country programme: The new RB-COSOP should target interventions that involve the restoration/management of critical catchments in priority areas of the country. Such interventions should promote an appropriate mix of sustainable ENRM investments, social equity measures and climate-smart agricultural practices. These interventions are meant to sustain IFAD's projects over time by assuring enough water flow, soil fertility and community adoption of sustainable activities. A useful tool for identifying critical catchments to target is the new National Irrigation Master Plan (2015), which identifies priorities for irrigation development based on a detailed screening and selection process that considers such factors as: water resource areas, livelihood zones, soil suitability, land use, climate and agro-climatic zones, surface and groundwater hydrology, cropping patterns and seasonality of water demand. The top 30 irrigation schemes identified in the Master Plan provide a starting point for looking at critical catchment opportunities for using the holistic landscape approach recommended by the SECAP Study to promote integrated restoration and management of the catchment, along with economic and social development and reduction of poverty and food insecurity. Malawi has not yet developed an environmental/climate impact hot-spot strategy for setting priorities. The Integrated Watershed Next steps Formulate new projects/ programmes that target critical catchments to promote integrated restoration/management investments/practices. Work with the MoAIWD Departments of Irrigation and Land Resources and Conservation, and the Environmental Affairs Department of MoNREM to identify priority catchments for future IFAD interventions. Work with the Environmental Affairs Department to 33 Government of Malawi/United Nations Country Team, United Nations Development Assistance Framework in Malawi (Lilongwe, 2011). 8

26 Appendix III EB 2016/119/R.16 Ensure that the RB-COSOP strategic objectives promote, to the extent practicable, a catchment restoration and management approach in the future country programme: Management Programme in the National Climate Change Investment Plan ( ) does not identify watershed hot spots for priority attention in adaptation investments. The RB- COSOP team should investigate using ASAP and/or GEF financing to develop a catchment hot spot strategy and then scale up successful climate-smart projects in priority areas, taking advantage of the investments and training that the communities have already received under IFAD interventions. Next steps develop a hot spot strategy for identifying priority catchments for scaling-up with IFAD interventions. Proposals for activities to access GEF, ASAP and other sources of funds The SECAP team recognizes that the IFAD country programme to be developed under the new RB-COSOP may not be able to address all of the environmental, social and climate priorities of the GoM and that some sources of external financing offer opportunities for discrete support to smallholder farmers, i.e. the Adaptation for Smallholder Agriculture Programme (ASAP), and for environmental issues of global significance, i.e. the Global Environment Facility (GEF). The SECAP Study proposes several actions eligible for external financing for the RB-COSOP team to consider. SECAP Strategic Actions for Supplemental Financing Consider supplemental financing for discrete priorities to support IFAD interventions: The new RB-COSOP should seek supplemental financing, where appropriate, for relevant SECAP activities from ASAP, GEF, and Green Climate Fund (GCF) sources. Next steps Identify appropriate activities for GEF, ASAP and GCF financing. Both the National Climate Change Policy (2015) and the National Climate Change Investment Plan ( ) target promotion of alternative (renewable) energy sources for fuel wood for cooking in order to (i) relieve the pressure on forests from fuel wood production and (ii) reduce exposure to indoor air pollution. A range of alternatives, including solar and micro-hydroelectric power and fuelwood saving cooking stoves among others, need to be evaluated for their feasibility in rural areas. GEF financing under its climate change mitigation focal area may present opportunities to demonstrate the feasibility of alternative energy sources in the Malawian context. An example of such a GEF project is UNDP s Increasing Access to Clean and Affordable Decentralized Energy Services in Selected Vulnerable Areas of Malawi, approved in Catchment committees will soon be created through the 2015 Water Act. ASAP and GEF funding could help strengthen these new institutions through appropriate training and have them as focal point for IFAD's work at catchment level. Aquaculture has significant potential in Malawi both for providing smallholder farmers with alternative income generation and for supplying them with a source of protein to meet their food security and nutritional needs. For this reason, the Fisheries Master Plan (2012) identifies increased aquaculture production and productivity as a strategic priority for Malawi. The Master Plan includes a Fish Farming Community Livelihood Programme, whose objective is to develop a self-supporting rural fish farming development model that improves integrated livelihoods of rural small-holder farmers. IFAD has extensive experience in sub- Saharan Africa with inland fisheries and aquaculture programmes benefiting the rural poor. The RB-COSOP team should investigate Work with GEF focal point in the Environmental Affairs Department and GEF counterparts to evaluate opportunities for GEF financing for demonstrating alternative energy sources in rural Malawi. Work with the Department of Water Resources and Department of Land Resources and Conservation, reinforcing efforts to coordinate at national level. Work with the Department of Fisheries to evaluate the potential for supporting a fish farming community livelihoods programme linked to other IFAD interventions. 9

27 Appendix III EB 2016/119/R.16 Consider supplemental financing for discrete priorities to support IFAD interventions: opportunities for benefiting smallholder farmers by developing an aquaculture project with ASAP financing. Climate change projections for Malawi indicate a future decline in maize yields and yet smallholder farmers prefer to use the nonhybrid varieties of maize, which are less resilient to CC impacts. Maize is the staple crop for smallholders and continues to be the principal crop promoted by IFAD interventions in Malawi (e.g. PRIDE). Because climate change impacts will increasingly threaten the sustainability of maize harvests in the future, IFAD will need to promote crop diversification and raise farming community awareness through training on this issue. The RB-COSOP team should consider ASAP financing for this sort of climate adaptation and awareness raising, perhaps in the context of the new PRIDE. Deforestation for charcoal production is one of the main drivers of catchment degradation. Urban demand for charcoal, increasing population pressures and lack of alternative lucrative livelihoods are all exacerbating the problem. Because IFAD s mandate will not allow it to address the urban demand for charcoal directly, IFAD should consider mechanisms for collaboration with another development partner, an international NGO or a UN organization, in addressing this issue. The RB-COSOP team should consider a partnership where IFAD would address forest protection issues in rural areas while the partner would address alternative energy sources to suppress urban demand for charcoal. IFAD s role would involve promoting alternative livelihoods, like beekeeping for honey production or small poultry through the involvement of the private sector (e.g. National Smallholder Farmers Association of Malawi) or PPPS for creation of cooperatives, improved access to markets and training on business practices. Other activities aimed at addressing deforestation and catchment degradation to ensure adequate water flows and soil fertility include: reforestation, promotion of natural regeneration of forests, forest conservation through beekeeping, environmental committees and community trainings, training on sustainable agricultural practices (agroforestry, conservation agriculture, river bank buffer zones, among others). It is extremely important to link these activities to appropriate incentives (see point above on alternative livelihoods) for smallholder farmers to ensure adoption, ownership and sustainability over time. Next steps Work with the Ministry of Agriculture, Department of Extension, to develop an appropriate outreach programme on maize for smallholder farmers. Work with appropriate development partners (e.g. UNDP, AfDB, bi-laterals) to develop an urban/rural alternative (renewable) energy project. Work with catchment committees and identity appropriate GoM department at national level, e.g. Land Resources and Conservation or Water Resources (which created the catchment committees) in MoAIWD. Work with private sector and extension workers to sustain farmers in their new alternative livelihoods activities. 10

28 Appendix IV EB 2016/119/R.16 Country at a glance World view Population, total Population growth (annual %) Surface area (sq. km) Population density (people per sq. km of land area) Poverty headcount ratio at national poverty lines (% of population) Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population) GNI, Atlas method (current US$) GNI per capita, Atlas method (current US$) GNI, PPP (current international $) GNI per capita, PPP (current international $) People Income share held by lowest 20% Life expectancy at birth, total (years) Fertility rate, total (births per woman) Adolescent fertility rate (births per 1,000 women ages 15-19) Contraceptive prevalence (% of women ages 15-49) Births attended by skilled health staff (% of total) Mortality rate, under-5 (per 1,000) Prevalence of underweight, weight for age (% of children under 5) Immunization, measles (% of children ages months) Primary completion rate, both sexes (%) Gross enrolment ratio, primary, both sexes (%) Gross enrolment ratio, secondary, both sexes (%) Gross enrolment ratio, primary and secondary, gender parity index (GPI) Prevalence of HIV, total (% of population ages 15-49) Northern Region Central Region Southern Region Source: The World Bank database 11